In India, IPOs( Initial Public Offering) previously used to be company friendly in the sense the investors are at receiving end in the following matters:
- Institutional investors and retail investors have certain % of quota on the company’s shares in respect of IPO as per SEBI order. The closing date and time for both categories are the same. So retail investors are at sea to know what is the extent of subscription to the IPO offer unless and until all Institutional investors complete their payment before closure time and date. But most of the institutional investors wait till last minute to subscribe to the issue thus making the retail investors to guess whether the IPO will be successful or failure and % of subscription. This created tension for retail applicants whether to subscribe or not to any IPO issue where subscription picture is not clear. In this tension, many times retail investors missed the IPO or erroneously subscribed to IPO which is a failure due to last minute non-interest shown by Institutional investors.
- Money has to be paid in advance in full before allotment in olden days. The company to whom money was remitted benefited by using the money for nearly one month to 2 month without interest. After allotment, the balance money was returned based on allotment. Thus investors had to lose bank interest for the said period and IPO company was benefited by free use of money invested for process period fully.
In order to remove the above problems, SEBI announced the plan/ schemes.
- SEBI is likely to bring at any time rule fixing the time limit for retail and institutional investors. The closure period of bidding will be earlier for institutional investors than retail investors. This will help retail investors to gauge the subscription % and guage listing price with some base so that they will not lose money when listed.
- For removing the other problem, SEBI enforced ASBA facility for investors.
ASBA facility: (Applications supported by Blocked Amount) :
This facility approved by SEBI came into operation from 1.5.2010.This facility can be used by the applicant from the bank only when he is having account there.
a) It is an application containing an authorization to block the application money in the approved bank account. If an investor opts for ASBA, his application money will be debited from the bank account to the extent of allotted qty from the bank account only if his/her application is selected for allotment after the basis of allotment is finalized .
b)Approved banks are those banks which has the approval of SEBI as SCSB(Self Certified Syndicate Banks).
The list of SCSB banks as on Sep 2010 are as follows:
Sl. No. Name of the bank ***see below Date of receipt of self certification Date of inclusion as SCSB
- Axis Bank Ltd December 23, 2009 January 1, 2010
- State Bank of Hyderabad December 24, 2009 January 1, 2010
- Corporation Bank December 24, 2009 January 1, 2010
- State Bank of Travencore December 24, 2009 January 1, 2010
- IDBI Bank Ltd. December 24, 2009 January 1, 2010
- State Bank of Bikaner and Jaipur December 24, 2009 January 1, 2010
- YES Bank Ltd. December 24, 2009 January 1, 2010
- Punjab National Bank December 24, 2009 January 1, 2010
- Deutsche Bank December 24, 2009 January 1, 2010
- Union Bank of India December 31, 2009 January 1, 2010
- HDFC Bank Ltd. December 31, 2009 January 1, 2010
- Bank of Baroda December 31, 2009 January 1, 2010
- ICICI Bank Ltd December 31, 2009 January 1, 2010
- Vijaya Bank December 31, 2009 January 1, 2010
- Bank of Maharashtra December 31, 2009 January 1, 2010
- State Bank of India December 31, 2009 January 1, 2010
- Andhra Bank January 4, 2010 January 15, 2010
- HSBC Ltd. January 4, 2010 January 15, 2010
- Kotak Mahindra Bank Ltd. January 7, 2010 January 15, 2010
- Bank of India January 12, 2010 January 15, 2010
- CITI Bank January 14, 2010 January 15, 2010
- IndusInd Bank January 15, 2010 January 15, 2010
- Allahabad Bank February 9, 2010 February 15, 2010
- Karur Vysya Bank Ltd. February 22, 2010 March 1, 2010
- The Federal Bank February 24, 2010 March 1, 2010
- Indian Bank March 12, 2010 March 15, 2010
- Central Bank of India April 6, 2010 April 15, 2010
- Oriental Bank of Commerce April 16, 2010 May 3, 2010
- Standard Chartered Bank April 16, 2010 May 3, 2010
- J P Morgan Chase Bank, N.A. May 26, 2010 June I, 2010
- Nutan Nagarik Sahakari Bank Ltd. July 1, 2010 July 15, 2010
- UCO Bank July 12, 2010 July 15, 2010
- Canara Bank August 12, 2010 August 15, 2010
*** Specified branches of banks.
Note: List of Self Certified Syndicate Banks (SCSBs) and their designed branches i.e. branches where ASBA application forms can be submitted is available on the websites of BSE and NSE and on the website of SEBI.
Applicant can make maximum five applications in a bank per issue and he should have bank account in the said SCSB.
According to SEBI, in the new IPO process, the SCSBs can accept the application/applications of IPO bidding of the bidders and can block the equivalent bidding amount of the bidder in his account. The banks upload the details in the electronic system of BSE/NSE. After completing this process and verification of the application, the ASAB bidder would be considered as successful bidder. After declaration of IPO result, if the bidder succeeds to get the equity share, the frozen money would be transferred to the bidding company’s account. If the bidder is not allotted any shares, then the freezed money would immediately be released to the applicant bank account from freeze.
This facility is not only applicable for IPO but also for right issues (in full ).
C. R. Venkata Ramani